Mexico's Profit Sharing Law: What's New and How to Score Your Slice

Hey there, hardworking folks! Have you noticed any tweaks in your profit-sharing payouts lately? If you've been scratching your head about it, let me enlighten you. Back in 2021, a little reform to the Federal Labor Law (LFT) waltzed in and shook things up in the profit-sharing department. Don't fret, though—I'm here to break down the nitty-gritty details of the changes for you.

First things first, profit sharing is a mandatory benefit in Mexico that finds its roots in both the Political Constitution of the United Mexican States and the Federal Labor Law (LFT). On April 23, 2021, the Official Gazette of the Federation (DOF) serenaded us with a reform regarding Outsourcing.

Now, what does this reform entail? It laid down fresh guidelines for the good ol' Employee Profit Sharing (PTU). And guess what? These new rules came into play in 2022, meaning companies are bound by law to pay out profits to their employees by the new regulations.

Now, let's dig into what's stayed the same amidst all this commotion. One criterion that remains unchanged post-reform is that companies must distribute a sweet 10% slice of the profits among their hardworking staff. This percentage is divided into two equal parts: 50% is divvied among the number of workers based on the number of days they've toiled away, and the other 50% is determined by the wages earned or paid by the workers throughout the year.

But hold your horses, not everyone gets a slice of the profit pie. Directors, administrators, and general managers of companies are left out of the equation, unfortunately. Temporary employees, on the other hand, get their fair share of the profits if they've worked a solid 60 days during the year. No freeloaders here!

But what about those folks in positions of trust? Well, they're included in the profit-sharing festivities, but their salary is capped at the salary of the unionized or regular worker with the highest salary in the company. And just to add a pinch of spice to the mix, their salary can be increased by a maximum of 20%. Oh, and did I mention they enjoy an income tax exemption of up to 15 UMA (UMA)? Sweet deal, right?

Now let's move on to the exciting stuff—the changes! The PTU reform has brought forth a shiny new adjustment to the LFT. Brace yourselves, folks, because it states, "The amount of profit sharing will have a maximum limit of three months of the employee's salary or the average of the profit sharing received in the last three years; the amount that is more favorable to the employee will be applied."

That's right, it's time to get your calculators out and crunch some numbers. If you're a math whiz, you might be wondering why this change came about. Well, it all goes back to the subcontracting reform that threw a curveball at many companies' business models.

You see, in the past, some companies had a fancy setup where one company without any personnel raked in the big bucks, while another or a few others provided services with their staff. This system allowed for efficient profit generation and rewarded employees with performance-based compensation. But thanks to the subcontracting reform, that structure got the boot. The new rules dictate that companies can no longer subcontract people or their main economic activities. Bummer, right?

But hold on, there's more! What happens when an employer substitution takes place? Who's responsible for shelling out the PTU? Well, with the outsourcing reform, the payment obligation falls on both employers. They'll both have to do their calculations and procedures and abide by the new ceilings set by the law. The new employer must calculate the ceilings based on the historical data of the previous employer or service provider. In simpler terms, the PTU payment for 2022 will be a combination of the shares from both companies. However, if an employer reports zero profits, they won't be obliged to dish out any profits.

Now, let's tackle the burning question of how PTU is calculated when there aren't three previous years of profit sharing to reference. Fear not, my curious amigos! In such cases, if there are no previous years or if there's at least one year with a loss within the three years, the profits and losses of those years will be totaled up and divided by three. It's a fair way to level the playing field and ensure everyone gets their fair share.

But what about those hardworking souls with less than three years of seniority? Well, fret not, my dear rookies! If you fall into this category, the calculation will be based on the average amount of profit sharing received by employees in similar positions, categories, or levels over the past three years. It's a clever way to make sure everyone gets their slice of the pie based on their current status.

Ah, but we can't forget about the salary ceiling. For employees in positions of trust, if their paycheck surpasses that of a unionized or permanent employee with a higher salary level, the maximum salary for PTU calculation will be based on the highest salary among the unionized employees. Fair is fair, right?

Now, here's a juicy tidbit for you—companies have a little trick up their sleeves. When they file their annual tax returns, they can limit the maximum amount to be distributed among workers to a lower sum. But here's the kicker: it's only if that lower amount is obtained after applying the aforementioned ceilings.

So, a company may distribute only 8.5% of the profits instead of the full 10%. But don't worry, according to the experts, this difference doesn't technically qualify as PTU, so the company won't be obligated to make up for it. Phew, talk about a sigh of relief!

Now, remember folks, you have until May 30th to enjoy the fruits of your labor and receive your profit-sharing payment. But hey, if your employer is an individual, lucky you—the deadline is extended to June 29th. So mark those calendars and keep your eyes peeled for that sweet bonus.

That's a wrap on the changes in the profit-sharing landscape, amigos! Stay diligent, keep working hard, and may your profits be bountiful. Remember, it's your right to receive your fair share, so don't be shy about asking for what you deserve. Happy profit-sharing, everyone!